Index: | What is a Business Model? | Business Model is not Revenue Model | How to Build a Business Model? |
Startups are typically born out of innovative, bright ideas however they will eventually die out if they don't have a viable business model.
Before embarking on more details, let's first define ...
What is a Business Model?
A business model, at the heart of any business, is a strategy for operating a business. It describes how a company will generate value for its customers, taking into account many key considerations, such as:
Who are your target customers?
What problem/s are you solving for them?
How are you solving those problem/s, to generate value for your customers?
Source: Lead-innovation.com
Business Model is not Revenue Model!
The business model in a holistic manner describes how a company generates value for its customers. The Revenue Model describes how a company generates revenue from that value proposition, and is, therefore, an important component of the business model.
Although a company may have multiple revenue streams but typically has only one business model.
How to Build a Business Model?
To help you generate a business model, let's go through the below image.
Image Source: BMI Lab
And, explore these four dimensions of the business model:
Who is your target customer (market/segment), and what is their key need/pain/problem that you're solving?
What is your offering i.e. value proposition (lower costs, speed, high productivity, savings) that your product/service provides to its target customers?
How is this value generated, and delivered to the customers?
What are the main tasks/activities you need to do?
What resources/technology are you using, and
What would be the distribution like i.e. the partners you need to rely on?
How would the company earn its revenues, and achieve profitability?
How will you achieve positive unit economics?
How will you scale up for growth, and achieve profitability?
Read:
Use the Business Model Canvas to structure your business model in a more coherent way.